https://www.profitconfidential.com/stock/mcdonalds-stock/the-mcdonalds-alternative-for-small-cap-investors/
The McDonald’s Alternative for Small-Cap Investors
George Leong, B.Comm.
Profit Confidential
2013-10-15T02:14:47Z
2017-08-10 10:01:37 While McDonald’s may be the “Best in Breed” for the fast food restaurant sector, financial analyst George Leong points out another solid fast food joint that may just be the right investment for small-cap investors in this space.
McDonalds Stock
https://www.profitconfidential.com/wp-content/uploads/2013/10/151013_PC_leong.jpg

The restaurant and fast food sectors are fickle, and can easily turn lower without much warning. It happened to burrito maker Chipotle Mexican Grill, Inc. (NYSE/CMG), when it got hammered between April and early October 2012 following its reports of soft results. The stock has since staged a steady rally back to above its previous high in April 2012.

The same thing happened to Ruby Tuesday, Inc. (NYSE/RT), with the stock plummeting around 16% after reporting a soft first quarter that saw continued declines in many key metrics, according to my stock analysis. Ruby could and will likely rally, based on my stock analysis, but it’s not in the same ballpark as Chipotle, so be careful if you are looking to trade the stock.

If you are looking for small-cap growth in the restaurant and fast food sector, you may want to consider a play like Denny’s Corporation (NASDAQ/DENN), as my stock analysis suggests. This sit-in family diner is known for its “Grand Slam” breakfast. The company has superior valuation to its peers, as my stock analysis indicates.

Take a look at the table below, and see how Denny’s sizes up:

Forward P/E

P/S

PEG

Denny's

16.69X

1.17

1.15

Ruby Tuesday

33.16X

0.36

13.98

McDonald's

15.41X

3.35

2

Burger King

20.77X

4.56

1.49

The big Wall Street shops focus on the big-name stocks that bring up tons of investment banking and advisory fees. While McDonalds Corporation (NYSE/MCD) is clearly the “Best of Breed” in the restaurant and fast food group, my stock analysis suggests smaller companies, like Denny’s, offer an alternative for investors along with better upside potential; albeit, they’re also riskier. (Read “McDonald’s Proving Position as ‘Best of Breed’ in the Fast Food Sector.”)

Denny’s has gone up 22.47% over the past 52 weeks and has easily outperformed the S&P 500 advance of 15.60% and the 0.99% advance by McDonald’s.

Chart courtesy of www.StockCharts.com

Over the past few years, Denny’s has restructured its operations by selling many of its stores to franchisors, which allows it to simply collect franchise fees while cutting overall costs to operate the stores, based on my stock analysis. According to the company’s web site, about 90% of the 1,690 restaurants in its global network are currently franchised. By changing to this model, Denny’s is now a stronger company, as my stock analysis indicates.

For those interested in Denny’s, my stock analysis suggests that the upside is there, but it could take a while, as the company continues to streamline its operations, play with its menu, and make it more visible to both the investment community and restaurant goers.

My stock analysis indicates that while McDonald’s is the top player in the restaurant and fast foods sector, for some added potential, a restaurant like Denny’s is geared toward the investor looking for a small-cap idea.

The McDonald’s Alternative for Small-Cap Investors

By George Leong, B.Comm. Published : October 15, 2013

The restaurant and fast food sectors are fickle, and can easily turn lower without much warning. It happened to burrito maker Chipotle Mexican Grill, Inc. (NYSE/CMG), when it got hammered between April and early October 2012 following its reports of soft results. The stock has since staged a steady rally back to above its previous high in April 2012.

The same thing happened to Ruby Tuesday, Inc. (NYSE/RT), with the stock plummeting around 16% after reporting a soft first quarter that saw continued declines in many key metrics, according to my stock analysis. Ruby could and will likely rally, based on my stock analysis, but it’s not in the same ballpark as Chipotle, so be careful if you are looking to trade the stock.

If you are looking for small-cap growth in the restaurant and fast food sector, you may want to consider a play like Denny’s Corporation (NASDAQ/DENN), as my stock analysis suggests. This sit-in family diner is known for its “Grand Slam” breakfast. The company has superior valuation to its peers, as my stock analysis indicates.

Take a look at the table below, and see how Denny’s sizes up:

Advertisement

Forward P/E

P/S

PEG

Denny’s

16.69X

1.17

1.15

Ruby Tuesday

33.16X

0.36

13.98

McDonald’s

15.41X

3.35

2

Burger King

20.77X

4.56

1.49

The big Wall Street shops focus on the big-name stocks that bring up tons of investment banking and advisory fees. While McDonalds Corporation (NYSE/MCD) is clearly the “Best of Breed” in the restaurant and fast food group, my stock analysis suggests smaller companies, like Denny’s, offer an alternative for investors along with better upside potential; albeit, they’re also riskier. (Read “McDonald’s Proving Position as ‘Best of Breed’ in the Fast Food Sector.”)

Denny’s has gone up 22.47% over the past 52 weeks and has easily outperformed the S&P 500 advance of 15.60% and the 0.99% advance by McDonald’s.

Chart courtesy of www.StockCharts.com

Over the past few years, Denny’s has restructured its operations by selling many of its stores to franchisors, which allows it to simply collect franchise fees while cutting overall costs to operate the stores, based on my stock analysis. According to the company’s web site, about 90% of the 1,690 restaurants in its global network are currently franchised. By changing to this model, Denny’s is now a stronger company, as my stock analysis indicates.

For those interested in Denny’s, my stock analysis suggests that the upside is there, but it could take a while, as the company continues to streamline its operations, play with its menu, and make it more visible to both the investment community and restaurant goers.

My stock analysis indicates that while McDonald’s is the top player in the restaurant and fast foods sector, for some added potential, a restaurant like Denny’s is geared toward the investor looking for a small-cap idea.

Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners.